Dunnellon lawyer: City in 'dangerous situation'

Published: Thursday, August 8, 2013 at 11:00 a.m.

Last Modified: Thursday, August 8, 2013 at 11:47 a.m.

DUNNELLON — The city of Dunnellon has picked up a new ally in its effort to stave off financial disaster.

Interim City Manager Eddie Esch enlisted the city’s bond counsel, Bryant Miller Olive, PA, to help guide the city through the complex legal and fiscal tangle it faces because of its financially troubled Greenlight Communications system.

There is much riding on the law firm’s efforts.

In the worst-case scenario, Dunnellon’s failure to resolve its problems could throw it into bankruptcy and cause a judge to dissolve the city government, said Susan Churuti, who heads Bryant Miller Olive’s State and Local Government Practice Group.

“So it is a pretty dangerous situation that you are facing,” Churuti told the City Council Wednesday. “My job is to get you out of this.”

Greenlight was launched in 2011 to provide high-speed Internet, phone and cable service to customers in and around Dunnellon.

But while the system has attracted about 500 customers, roughly meeting expectations, officials say the city did not borrow enough money to cover Greenlight’s losses until it grew large enough to break even.

As a result, it had been losing about $250,000 a month.

A financial review ordered by the City Council revealed last month that city officials, under former City Manager Lisa Algieri’s administration, were covering the losses out of bond money that was supposed to pay for water and sewer projects.

That may violate bond agreements between the city and the financial institution that loaned the city the money for the utility projects.

In the wake of the financial review, Interim City Manager Esch froze the money for the water and sewer projects to ensure it would no longer be improperly used to cover Greenlight’s losses.

He also canceled some maintenance contracts with vendors to offset some of the losses. Currently, Esch said, the system is losing about $130,000 a month.

But the city cannot sustain those losses for long and is looking to get rid of Greenlight. Four private telecommunications companies have made offers, and the City Council is expected to choose one Monday when it next meets.

In the meantime, the city has had to declare a state of financial emergency and inform the governor’s office of its predicament.

Bryant Miller Olive, which does bond counsel work for more than half the municipalities in Florida, will take on a larger role in helping the city through its legal obstacles. It will charge $285 an hour for its services, which Churuti said is the firm’s “reduced governmental rate.”

According to its agreement with the city, BMO will provide an array of legal services in the coming months, depending upon the twists and turns the Greenlight controversy takes.

The firm will take part in Dunnellon’s negotiations with whatever company the city selects to take over Greenlight. It will help resolve any problems that might arise from the city spending its water and sewer bonds to cover Greenlight losses. It could even play a role in renegotiating employee contracts if the city’s finances continue to deteriorate.

The goal, Churuti said, is to steer the city away from financial disaster and avoid Chapter 9, which is the federal bankruptcy law covering municipalities.

In Chapter 9, she said, a judge could dissolve the city, turning its services over to county government and establishing a municipal services taxing unit to continue paying its obligations.

Mayor Nathan Whitt, who calls himself the “eternal optimist,” said he doesn’t think it will come to that.

“I think we’re moving in a very, very positive direction,” he said. “I see a trickle of light at the end of the tunnel.”

<p>DUNNELLON — The city of Dunnellon has picked up a new ally in its effort to stave off financial disaster.</p><p>Interim City Manager Eddie Esch enlisted the city's bond counsel, Bryant Miller Olive, PA, to help guide the city through the complex legal and fiscal tangle it faces because of its financially troubled Greenlight Communications system.</p><p>There is much riding on the law firm's efforts.</p><p>In the worst-case scenario, Dunnellon's failure to resolve its problems could throw it into bankruptcy and cause a judge to dissolve the city government, said Susan Churuti, who heads Bryant Miller Olive's State and Local Government Practice Group.</p><p>“So it is a pretty dangerous situation that you are facing,” Churuti told the City Council Wednesday. “My job is to get you out of this.”</p><p>Greenlight was launched in 2011 to provide high-speed Internet, phone and cable service to customers in and around Dunnellon.</p><p>But while the system has attracted about 500 customers, roughly meeting expectations, officials say the city did not borrow enough money to cover Greenlight's losses until it grew large enough to break even.</p><p>As a result, it had been losing about $250,000 a month.</p><p>A financial review ordered by the City Council revealed last month that city officials, under former City Manager Lisa Algieri's administration, were covering the losses out of bond money that was supposed to pay for water and sewer projects.</p><p>That may violate bond agreements between the city and the financial institution that loaned the city the money for the utility projects.</p><p>In the wake of the financial review, Interim City Manager Esch froze the money for the water and sewer projects to ensure it would no longer be improperly used to cover Greenlight's losses.</p><p>He also canceled some maintenance contracts with vendors to offset some of the losses. Currently, Esch said, the system is losing about $130,000 a month.</p><p>But the city cannot sustain those losses for long and is looking to get rid of Greenlight. Four private telecommunications companies have made offers, and the City Council is expected to choose one Monday when it next meets.</p><p>In the meantime, the city has had to declare a state of financial emergency and inform the governor's office of its predicament.</p><p>Bryant Miller Olive, which does bond counsel work for more than half the municipalities in Florida, will take on a larger role in helping the city through its legal obstacles. It will charge $285 an hour for its services, which Churuti said is the firm's “reduced governmental rate.”</p><p>According to its agreement with the city, BMO will provide an array of legal services in the coming months, depending upon the twists and turns the Greenlight controversy takes.</p><p>The firm will take part in Dunnellon's negotiations with whatever company the city selects to take over Greenlight. It will help resolve any problems that might arise from the city spending its water and sewer bonds to cover Greenlight losses. It could even play a role in renegotiating employee contracts if the city's finances continue to deteriorate.</p><p>The goal, Churuti said, is to steer the city away from financial disaster and avoid Chapter 9, which is the federal bankruptcy law covering municipalities.</p><p>In Chapter 9, she said, a judge could dissolve the city, turning its services over to county government and establishing a municipal services taxing unit to continue paying its obligations.</p><p>Mayor Nathan Whitt, who calls himself the “eternal optimist,” said he doesn't think it will come to that.</p><p>“I think we're moving in a very, very positive direction,” he said. “I see a trickle of light at the end of the tunnel.”</p>